For goodness sake, get a CLUE!
Printed in the Ventura County Star-January 26, 2003

Get a CLUE!  C.L.U.E. stands for the Comprehensive Loss Underwriting Exchange which is a huge database used by the insurance industry to track claims homeowners file against their homeowner’s insurance policies.  This information helps insurers avoid fraud and writing policies for people who make excessive claims, but this information also follows the home the claim is made on.   Just like having a bad credit record affects your ability to get financing for a home, negative information in the C.L.U.E. database can affect whether or not you can get a homeowners insurance policy and for what price. 

It is critical that you find out what the claims history of a property is before you buy it and the best way to do that is to get a C.L.U.E. report.  Getting a C.L.U.E. report as soon as possible during a real estate transaction will help ensure that you don’t receive an unpleasant surprise at the last moment causing unneeded stress and delays… and possibly costing your home sale to fall through. 

Imagine the following scenario:  A young couple signs a purchase contract for a nice starter home.  With all the things involved with buying their first home, they put off getting homeowner’s insurance until just before the closing only to be denied coverage because of a water related insurance claim the sellers had filed a couple of years before.  Although the damage had been fixed, the claim had flagged the house as a high risk for mold.  Only after contacting several insurance companies do the buyers finally find one that will insure them—at double the standard premium.  In the end, it could have been worse; some buyers have obtained insurance only to have it cancelled a couple of months after escrow closed because of negative information in the C.L.U.E. database.  If this happens to you, you might be forced to use an insurer obtained by your lender costing many times more than you were paying, and with coverage not nearly as good. 

Why is this becoming an issue now?  It’s simple; the insurance industry is facing tough times. In the 1990s, insurers were hit with an extraordinary number of catastrophes, including earthquakes and tornadoes, requiring them to pay out some $700 million a month in claims.  Another issue is the nations housing stock is aging.  With age comes the need for more repairs, and costs for home repairs and rebuilding continue to rise each year.  And perhaps most importantly, insurance companies have suffered some big investment losses.  The stock market is no longer providing insurers the handsome returns on invested premiums it did in the past.  As a result of all this, insurance companies have tightened up on the types of policies they will write.  The information in the C.L.U.E. database plays a major role in their decision making process. 

How to do you order a C.L.U.E. report for a home you’re buying?  Well you can’t, only the current homeowner can.  Choice Point is the name of the company that maintains the C.L.U.E. database.  A homeowner can go to their website at www.ChoiceTrust.com and order a C.L.U.E. report online for $12.95.  Make sure that you ask your real estate agent to write into the Purchase Agreement that the sellers provide you a C.L.U.E. report.  The current California Association of REALTORS’ Purchase Contract contains a clause that requires sellers to disclose to the buyers the claims history of the property, but a seller can only tell the buyers what they know.  If they’ve only lived in a home for a short time, they may not be aware of the entire claims history—and what if the C.L.U.E. report contains errors?  Only by getting a C.L.U.E. report can you have the answers you need. 

You may also want to consider opting for a higher deductible on your homeowner’s policy to avoid smaller claims that could give your insurance company reason to cancel you.  A deductible of $1,000 can decrease your premiums by as much as 25%.  Be aware that even talking to your insurance company about damage to your home or a potential claim could cause an entry to be made in the C.L.U.E. database—even if you never make a claim!  This could cause a major problem for you if you get cancelled and have to obtain new coverage.  It could also complicate the sale of your home if the buyer cannot get an insurance policy.  Remember that it is critical not to wait until the last minute to arrange your homeowner’s insurance.  And most importantly, don’t forget to get a C.L.U.E.!